Due to its timing and brief transition time, the World Bank has warned that the recently redesigned naira, which entered circulation last week, may have a detrimental impact on economic activity, particularly for poor Nigerians.
This was disclosed by the Washington-based bank in a recent study titled “Nigeria Development Update.”
This occurred in the wake of the newly revised notes’ conflicting reviews.
In an effort to reduce counterfeiting, abduction ransom payments, terrorism financing, and surplus cash in circulation, the Central Bank of Nigeria revealed new N, 1000, N500, and N200 notes last month.
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However, the World Bank stated in its assessment that the new regulation will have a severe impact on small enterprises, particularly those that do daily cash transactions.
The report read in part, “While periodic currency redesigns are normal internationally and the naira does appear to be due for it since naira notes have been redesigned for two decades, the timing of and short transition period for this demonetization may have negative impacts on economic activity, in particular for the poorest households.
“International experience suggests that rapid demonetizations can generate significant short-term costs, with small-scale businesses, and poor and vulnerable households, potentially being particularly affected due to being liquidity-constrained and heavily reliant on day-to-day cash transactions.
“At present, households and firms already face elevated financial pressures from prolonged, high inflation, recently compounded by external food and fuel price shocks, and the severe floods, and phasing out existing naira notes over a short time period may add to their challenges.”
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The intentions of the cashless policy are clear, but the implementation and timing are not perfect, according to Dr. Uju Ogunbunka, president of the Bank Customers Association of Nigeria.
He said, “From the cashless policy point of view, we should appreciate that, as much as possible, the government is trying to limit the use of cash for transactions, more so, now that they are redesigning the currency. “The second thing is that the government wants to drive the use of online banking, which is good for our economy. Unfortunately, there have been so many complaints about failed transactions.”
“There is hardly any week without complaints in the banking hall. You will see people shouting with regard to transfer failures. Have we put enough structure to take care of some of these things? The answer is, we are yet to, we are making progress, yes, but we should give enough room and time for some of these things to play out rather than short-circuit the system.”
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Additionally, the policy would hurt enterprises and MSMEs, according to Dr. Adebayo Adams, the Lagos State Chairman of the Nigerian Association of Small and Medium Enterprise.
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